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Mac & Nac manufactures two types of women's handbags: a handbag that can be worn cross- body (model A), and an over-the-shoulder handbag (model B).
Mac & Nac manufactures two types of women's handbags: a handbag that can be worn cross- body (model A), and an over-the-shoulder handbag (model B). Cost and revenue data for each model is shown below: | ||||||||||
Model A | Model B | |||||||||
Selling price per unit | $80 | $100 | ||||||||
Variable cost per unit | $56 | $50 | ||||||||
The plant that makes these handbags is operating at capacity. The company is currently using all of the available sewing machine hours which is 10,000 hours per month. Model B requires 2 hours of sewing machine time (there's more pockets and zippers on this model) while Model A requires 0.8 hours of sewing machine time. | ||||||||||
Demand is 4,000 and 4,500 units for Model A and Model B respectively. | ||||||||||
Show all your work. | ||||||||||
a. Which model should the company focus on given the constraint with machine hours? Use calculations to support your answer. | ||||||||||
b. The company has determined that a minimum of 2,500 units should be made of each model. Calculate the total number of units of each model to produce.
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